System and Method for Automatic Scalping a Tradeable Object in an Electronic Trading Environment

ABSTRACT

A system and methods for automatic scalping in an electronic trading environment are presented. According to one embodiment, a trading application may display an indicator associated with a price level based on which a tradable object can be automatically traded. When a scalping application detects a fill associated with a first order, the scalping application may automatically enter a second order to offset a position created with the first order. According to one embodiment, the second order is automatically placed on the market when the inside market moves to a predetermined price level in relation to the displayed indicator.

CROSS REFERENCE TO RELATED APPLICATIONS

This application is a continuation of U.S. patent application Ser. No.11/417,484 filed May 3, 2006, which is a continuation of U.S. patentapplication Ser. No. 10/403,879 filed Mar. 31, 2003, now U.S. Pat. No.7,447,655, which is a continuation-in-part of U.S. patent applicationSer. No. 10/125,894 filed Apr. 19, 2002, now U.S. Pat. No. 7,389,268,which is a continuation-in-part of U.S. patent application Ser. No.09/971,087 filed Oct. 5, 2001, now U.S. Pat. No. 7,127,424, which claimsthe benefit of U.S. Provisional Application No. 60/238,001 filed Oct. 6,2000. U.S. patent application Ser. No. 10/125,894 is also acontinuation-in-part of U.S. patent application Ser. No. 09/590,692filed Jun. 9, 2000, now U.S. Pat. No. 6,772,132, and acontinuation-in-part of U.S. patent application Ser. No. 09/589,751filed Jun. 9, 2000, now U.S. Pat. No. 6,938,011, both of which claim thebenefit of U.S. Provisional Application No. 60/186,322 filed Mar. 2,2000. U.S. patent application Ser. No. 10/125,894 also claims thebenefit of U.S. Patent Application No. 60/325,553 filed Oct. 1, 2001.The entire contents of each of the above-referenced applications areincorporated herein by reference for all purposes.

FIELD OF INVENTION

The present invention is directed towards electronic trading. Morespecifically, the present invention is directed to tools for automatictrading tradeable objects that can be traded with quantities and/orprices.

BACKGROUND

Trading methods have evolved from a manually intensive process to atechnology enabled, electronic platform. With the advent of electronictrading, a user or trader can be in virtually direct contact with themarket, from practically anywhere in the world, performing nearreal-time transactions, and without the need to make personal contactwith a broker.

Electronic trading is generally based on a host exchange, one or morecomputer networks, and client devices. In general, the host exchangeincludes one or more centralized computers to form the electronic heart.Its operations typically include order matching, maintaining order booksand positions, price information, and managing and updating a databasethat records such information. The host exchange is also equipped withan external interface that maintains uninterrupted contact to the clientdevices and possibly other trading-related systems.

Using client devices, market participants or traders link to the hostexchange through one or more networks. A network is a group of two ormore computers or devices linked together. There are many types of wiredand wireless networks such as local area networks and wide areanetworks. Networks can also be characterized by topology, protocol, andarchitecture. For example, some market participants may link to the hostthrough a direct connection such as a T1 or ISDN. Some participants maylink to the host exchange through direct connections and through othercommon network components such as high-speed servers, routers, andgateways. The Internet, a well-known collection of networks andgateways, can be used to establish a connection between the clientdevice and the host exchange. There are many different types of networksand combinations of network types known in the art that can link tradersto the host exchange.

Regardless of the way in which a connection is established, softwarerunning on the client devices allows market participants to log onto oneor more exchanges and participate in at least one market. A clientdevice is a computer such as a personal computer, laptop computer,hand-held computer, and so forth that has network access. In general,client devices run software that creates specialized interactive tradingscreens. Trading screens enable market participants to obtain marketquotes, monitor positions, and submit orders to the host.

Generally, when an order is submitted to a host exchange, the hostchecks the limits of the order, for example price and quantity, andprioritizes the order with other orders of the same price. When buy andsell order prices cross in the market, a trade occurs, and theinformation related to the trade is then relayed in some fashion to theclient devices. In fact, the host exchange publishes a data feed to theclient devices so that the traders can have access to the most currentmarket information.

Market information commonly includes information regarding the insidemarket and market depth. The inside market is the lowest sell price inthe market and the highest buy price in the market at a particular pointin time. Market depth refers to quantity available at the inside marketand can refer to quantity available at other prices away from the insidemarket. The quantity available at a given price level is usuallyprovided by the host exchange in aggregate sums. In other words, a hostexchange usually provides the total buy or the total sell quantityavailable in the market at a particular price level in its data feed.The extent of the market depth available to a trader usually depends onthe host exchange. For instance, some host exchanges provide marketdepth for an infinite number of price levels, while some provide onlyquantities associated with the inside market, and others may provide nomarket depth at all. Additionally, host exchanges can offer other typesof market information such as the last traded price (LTP), the lasttraded quantity (LTQ), and/or order fill information.

To profit in electronic markets, market participants must be able toassimilate large amounts of data provided by an exchange, and to reactmore quickly than other competing market participants. Some traders,commonly known as scalpers, trade for small, short-term profits duringthe course of the trading session. Such traders establish and liquidatetheir positions quickly, usually within the same hour, or a few minutes,thus making small profits or incurring small losses. However, becausemarket information provided to a trader in an electronic tradingenvironment may change so much faster than in the traditional pitenvironment, the trader may not be able to respond to the changingmarket as fast as he/she would wish to. It is therefore desirable tooffer tools that can assist a trader in trading a tradable object in anelectronic marketplace and help the participant to make desirabletrades.

BRIEF DESCRIPTION OF THE DRAWINGS

Example embodiments of the present invention are described herein withreference to the following drawings, in which:

FIG. 1 is an example of a network configuration for a communicationsystem utilized to access one or more exchanges;

FIG. 2 is a block diagram illustrating a trading interface that allows atrader to enter orders on an electronic exchange;

FIG. 3 is a block diagram illustrating a trading interface with agraphical indicator associated with a price level based on which one ormore orders may be automatically sent to an electronic exchange;

FIG. 4 is a flow chart illustrating a method for automatic scalpingaccording to one embodiment using one graphical indicator associatedwith a price level;

FIG. 5 is a block diagram illustrating a trading interface displaying anindicator range associated with a plurality of prices based on which oneor more orders may be automatically sent to an electronic exchange; and

FIG. 6 is a block diagram illustrating a trading interface displaying anindicator range that can be repositioned by a trader to desired pricelevels.

DETAILED DESCRIPTION OF THE PREFERRED EMBODIMENT(S) I. Automatic TradingOverview

As described with reference to the accompanying Figures, the presentinvention provides a method and system that preferably operates as anautomatic scalping tool by automatically entering an order to offset aposition created with another order that has been filled. That is, itpreferably operates as a trader's automatic scalping tool that preventsa trader from holding his position open for a long period of time, andallows a trader to make profit upon detecting small market movements.

According to one embodiment, a trader may configure a target price basedon which the automatic scalping tool may enter orders to an exchange.For example, if the automatic scalping tool detects the market trend inan upward direction and further that the inside market reaches orcrosses the user pre-configured target price, the automatic trading toolmay automatically place a sell order to open a position for the trader.In such an embodiment, a price at which the automatic scalping toolplaces the sell order may be determined based on any user definedformula. For example, the sell order may be placed at the inside marketprice level or a specific number of ticks away from the inside market.When the sell order is filled, and upon detecting that the market movesin a downward direction and that the inside market reaches or crossesthe target price, the automatic scalping tool may automatically place abuy order to offset or close the position created with the sell order.Advantages, including those described directly above, will becomereadily apparent to one skilled in the art upon reading the descriptionherein.

II. Hardware and Software Overview

FIG. 1 is a block diagram that illustrates an electronic trading system100 in accordance with the preferred embodiment. The system 100 includesat least one host exchange 102 and one or more client devices 104.Intermediate devices such as gateways, routers, and other such types ofnetwork devices may be used to assist the client device 104 and hostexchange 102 in communicating over network(s) 106. Intermediate devices,additional host exchanges, and additional client devices are not shownin FIG. 1 for sake of clarity. It should be understood, however, thatother types of network configurations known in the art may be used asthe system 100.

A. Host Exchange

The host exchange 102 may include the Chicago Board of Trade (“CBOT”),the New York Stock Exchange (“NYSE”), the Chicago Mercantile Exchange(“CME”), the Xetra (a German stock exchange), or the Europeanderivatives market (“Eurex”). The host exchange 102 might also refer toother systems, from basic to more complex systems, which automaticallymatch incoming orders. These example host exchanges and other hostexchanges are well known in the art. Communication protocols requiredfor connectivity to one of these host exchanges are also well known inthe art.

An exchange 102, 104, 106 can implement numerous types of orderexecution algorithms, sometimes the type of algorithm depends on thetradeable object being traded. The preferred embodiments may be adaptedby one skilled in the art to work with any particular order executionalgorithm. Some example order execution algorithms includefirst-in-first-out and pro rata algorithms. The first-in-first-out(FIFO) algorithm, used for some markets listed with Eurex for example,gives priority to the first person to place an order. The pro rataalgorithm, used for some markets listed with LIFFE for example, splitsall orders for the same price. The present invention is not limited toany particular type of order execution algorithm.

Regardless of the type of order execution algorithm used, each hostexchange including the host exchange 102 preferably provides similartypes of information to the subscribing client devices 104. Theinformation that the host exchange 102 provides is referred tohereinafter as market information. Market information may include datathat represents just the inside market, where the inside market is thelowest sell price (best offer or best ask) and the highest buy price(best bid) at a particular point in time. The market information 108 mayalso include market depth. Market depth refers to quantities availableat the inside market and can also refer to quantities available at otherprices away from the inside market. The market depth of a tradeableobject is preferably represented in an exchange order book whichprovides at least some of the current bid and ask prices and associatedquantities in the market for that tradeable object. This information, orsome portion of it, is preferably transmitted to client devices in theform of market updates in a data feed. Market information can containother types of market information such as the last traded price (LTP),the last traded quantity (LTQ), and/or order fill information. Thecontents of market information are generally up to the host exchange102.

As previously described, the preferred embodiment may be used to tradeany tradeable object. As used herein, the term “tradeable object,”refers simply to anything that can be traded with a quantity and/orprice. It includes, but is not limited to, all types of tradeableobjects such as financial products, which can include, for example,stocks, options, bonds, futures, currency, and warrants, as well asfunds, derivatives and collections of the foregoing, and all types ofcommodities, such as grains, energy, and metals. The tradeable objectmay be “real”, such as products that are listed by an exchange fortrading, or “synthetic”, such as a combination of real products that iscreated by the user. A tradeable object could actually be a combinationof other tradeable object, such as a class of tradeable objects.

B. Client Device

In the preferred embodiment, the client device 104 is a computer thatprovides an interface to trade at the host exchange 102. An exampleclient device is a personal computer, laptop computer, hand-heldcomputer, and so forth. The client device 104, according to thepreferred embodiment, includes at least a processor and memory. Theprocessor and memory, which are both well-known computer components, arenot shown in the figure for sake of clarity. Memory may include computerreadable medium. The term computer readable medium, as used herein,refers to any medium that participates in providing instructions to theprocessor for execution. Such a medium may take many forms, includingbut not limited to, non-volatile media, volatile media, and transmissionmedia. Non-volatile media includes, for example, optical or magneticdisks, such as a storage device. Volatile media may include dynamicmemory, such as main memory or RAM (random access memory). Common formsof computer-readable media include, for example, a floppy disk, aflexible disk, a hard disk, a magnetic tape, or any other magneticmedium, a CD-ROM, any other optical medium, punch cards, paper tape, anyother physical medium with patterns of holes, a RAM, a PROM, and EPROM,a FLASH-EPROM, and any other memory chip or cartridge, or any othermedium from which a computer can read.

In the preferred embodiment, the client device 104 receives marketinformation 108 from the host exchange 102. The market information isreceived over the network(s) 106. The network(s) 106 may include a groupof computers and/or associated devices that are connected bycommunications facilities, and can involve permanent connections, suchas cables, or temporary connections made through telephone or othercommunication links. The network(s) 106 can be as small as a LAN (localarea network) consisting of a few computers, printers, and otherdevices, or it can consist of many small and large computers distributedover a vast geographic area (WAN or wide area network), or it canconsist of both types of networks (both LAN and WAN).

According to the preferred embodiment, market information is displayedto the trader on the client device 104. Preferably, the marketinformation, or a portion thereof, is arranged using techniquesdescribed herein and is displayed on the visual output device or displaydevice of the client device 104. The output device can be any type ofdisplay. For example, the display could be a CRT-based video display, anLCD-based or a gas plasma-based flat-panel display, or some other typeof display. The present invention is not limited to any type of display.

Upon viewing market information or a portion thereof, a trader may wishto send transaction information to the host exchange 102. To do so, thetrader may input the transaction information into the client device bytyping into a keyboard, through a mouse, or some other input device.Preferably, transaction information includes an order to buy or an orderto sell a tradeable object. An order can have multiple parameters,price, quantity, a type of order (e.g., a buy or sell), but the presentinvention is not limited to a particular number of parameters that maybe used to characterize the order. According to another embodiment,transaction information might also refer to other order relatedtransactions such as delete order messages, cancel and replace messages,and so forth. There are many different types of messages and order typesthat can be submitted to the host exchange 102, all of which areconsidered various types of transaction information. Then, transactioninformation is sent from the client device 104 to the host exchange 102over the network(s) 106.

As previously described, FIG. 1 provides an example system overviewaccording to a preferred embodiment. Various changes and/ormodifications may be made to the system and still fall within the scopeof the present invention. For example, it should be understood that thepresent invention is not limited to any particular network architectureor configuration such as described in FIG. 1. The present invention maybe applied with utility on any electronic device in any network that canbe used for electronic trading.

C. Trading Interface

A commercially available trading application that allows a user to tradein a system like the one shown in FIG. 1 is X_TRADER® from TradingTechnologies International, Inc. of Chicago, Ill. X_TRADER@ alsoprovides an electronic trading interface, referred to as MD Trader™, inwhich working orders and/or bid and ask quantities are displayed inassociation with a static axis of prices. However, the preferredembodiments are not limited to any particular product that performstranslation, storage and display functions.

The example embodiments for automatic scalping will be described belowin reference to the MD Trader™-style display that displays information,such as orders to buy or orders to sell, in association with pricelevels arranged along a common static axis or scale of prices. Thequantities associated with the orders to buy are preferably displayed ina bid display region, and quantities associated with orders to sell arepreferably displayed in an ask display region. According to oneembodiment, bid and ask display regions preferably have a plurality oflocations, where each location corresponds to a price level along thecommon static axis of prices.

The quantities for each order being displayed via the MD Trader™-styledisplay may be displayed using any indicator types. For example, theindicator can be a graphical representation of quantity (e.g., colors,bars, etc.) or can simply be a number. The price levels are fixed inrelation to bid and ask display regions such that the indicatorsdisplayed in these regions can move relative to the display (e.g., thescreen). For example, the portion of the static axis that is beingviewed can be changed by scrolling up or down the axis or by entering arepositioning command. One embodiment using this type of display systemdisplays market information with respect to a vertical axis so that themarket information fluctuates logically up and down relative to the axisas the market prices fluctuate. It should be understood that while theexample embodiments are described in reference to the MD Trader™-styledisplay, the present invention is not limited to any particular displayand could be used with different or equivalent displays. Further, itshould be understood that many modifications to the MD Trader™-styledisplay are possible as well. For example, information related to atradable object may be displayed horizontally relative to a horizontallyoriented axis, n-dimensionally, or in any other fashion.

In a fast moving market, where varying price levels are trading (i.e.,bids and offers entering the market are being matched at differentprices), it is beneficial for a trader to be able to quickly enterorders and analyze market information. FIG. 2 illustrates a display 200that allows a trader to quickly enter orders at specific price levels byclicking next to a static axis of prices, displayed as a static column,and to quickly and easily see information such as working orders. Thedisplay 200 may be used to display traded quantity by price as will bedescribed in greater detail below.

The display may generally include a number of different regions that maybe used to display market information. As shown in FIG. 2, the display200 includes a price column 206, a bid quantity (“Bid Qty”) column 202,and an ask quantity (“Ask Qty”) column 204. In the preferred embodiment,the three columns are shown in different colors so that a trader candistinguish them. Further, it should be understood that a trader has theability to control the arrangement of the columns on the display. Forexample, the Bid Qty column 202 and the Ask Qty column 204 could bepositioned to the left of the price column 200. However, it should beunderstood that other arrangements are possible as well. The Bid Qtycolumn 202 displays bid quantities, and the Ask Qty column 204 displaysask quantities. The representative prices for a given tradable objectare shown in the price column 206.

As mentioned in the preceding paragraphs, the price column 206 includesa static axis of prices. It should be understood that static, in thecontext of the embodiments described hereinafter, does not meanimmovable, but rather fixed in relation. For example, with a static axisof prices, the axis itself may be movable (e.g., via a recentering,repositioning, or scrolling command), but the prices represented remainfixed in relation to the market information, subject to consolidation orexpansion. Further, for example, the static axis of prices may stayfixed even when the market moves or when the market changes unless arepositioning, recentering or scrolling command is received. In thepreferred embodiment, the static axis of prices is associated with aplurality of locations, and each location corresponds to a differentprice. According to one example, the price axis does not move inresponse to price changes, such as price addition or deletion in theexchange order book. Thus, when an exchange order book is updated toinclude quantity at a new price or to remove a price, the price axispreferably does not move, and the order data is mapped to thepredetermined location along the price axis corresponding to the newprice. Further, as an example, the price axis preferably does not move(unless, for example, a repositioning, recentering or scrolling commandis received) in response to a change in the inside market. It shouldalso be understood that when the static price axis is described as notmoving herein, the present application is referring to movements of theprice axis within the trading interface display and not to movementscaused by moving the location of the trading interface display on ascreen. For example, the trading interface display can be a window on acomputer display and dragging that window to a new location on thecomputer display would not be considered moving the price axis. Itshould be understood that in one embodiment, the static axis of pricescould be displayed in any manner, including in a row, on any angle, orn-dimensionally, without departing from the invention. Further,alternatively, prices do not need to be displayed.

It should be understood that the display 200 is not limited to thecolumns and information described in reference to FIG. 2, and variousother information may be presented in relation to the display 200. Moreinformation relating to the X_TRADER@ and the MD Trader™-style displayare described in U.S. patent application Ser. No. 09/590,692, entitled“Click Based Trading With Intuitive Grid Display of Market Depth,” filedon Jun. 9, 2000, U.S. patent application Ser. No. 09/971,087, entitled“Click Based Trading With Intuitive Grid Display of Market Depth andPrice Consolidation,” filed on Oct. 5, 2001, and U.S. patent applicationSer. No. 10/260,643, entitled “System and Method For Displaying HighestAnd Lowest Traded Prices Of Tradable Object,” filed on Sep. 30, 2002,the contents of which are incorporated herein by reference. Moreover,the trading application may implement tools for trading tradable objectsthat are described in U.S. patent application Ser. No. 10/125,894, filedon Apr. 19, 2002, entitled “Trading Tools for Electronic Trading,” thecontents of which are incorporated herein by reference. The specificfeatures of the embodiments of a display as in FIG. 2 are an example ofone embodiment of a screen that can be used with the present invention.It should be understood that the present invention is not limited,however, to such a screen display, and could be used with any type ofscreen display.

III. Automatic Scalping

In accordance with one embodiment, the trading application may includean automatic scalping application that provides a way to automaticallyenter orders for a trader, or to automatically enter offsetting ordersonce a fill of another manually or automatically entered order isdetected. It should be understood that the automatic scalpingapplication may be located on a client terminal or any other networkentity, such as a gateway, in communication with the client terminal.Using the methods described below, the automatic scalping applicationmay assist scalpers to enter their orders faster and allows them to makehigher profits or incur lower losses based on market movements. Asexplained earlier, scalping is a term that is well known in trading, andit refers to a trading technique in which a trader trades for relativelysmaller gains over a short period of time.

In the embodiments described hereinafter, the automatic scalpingapplication facilitates scalping by providing the user with an automaticorder entry mechanism. The automatic order entry mechanism may beactivated based on a user input that in turn may activate a dialog boxvia which a trader may enter scalping parameters. Additionally, the userinput may activate one or more graphical indicators associated with oneor more prices at which a tradeable object can be automatically traded.In such an embodiment, the graphical indicator(s) may be displayed viathe trading interface in relation to the static axis of prices, and atrader may manipulate the indicators using a mouse, for example.However, other actuating mechanisms can be used as well to activateautomatic scalping, such as, for example, a scalping icon displayed onthe user interface that may be activated and deactivated by a traderduring a trading day.

It should be understood that many different embodiments may be used toassist a trader in setting up automatic scalping parameters as well asindicators associated with prices at which an order may be automaticallyplaced on the market by the automatic scalping application. In oneembodiment, a trader may use a mouse input to position a horizontal lineor any other type of graphical indicator associated with a target price,based on which the automatic scalping application may automaticallyenter orders to a host exchange. More specifically, the automaticscalping application will automatically enter orders depending on aninside market position relative to the target price. Alternatively, theautomatic trading application may only enter orders automatically upondetecting that one of the manually entered orders has been filled.

FIG. 3 illustrates a trading interface 300 displaying a graphicalindicator associated with a price level based on which one or moreorders may be automatically submitted to an electronic exchange. Thetrading interface 300 displays an inside market indicator 302, and agraphical indicator 304 associated with a price level based on which theautomatic scalping application may enter orders to an exchange. Itshould be understood that the graphical indicator 304 can have anyformat, and the format of the indicator 304 can be user configurable.For example, the indicator 304 is not limited to extending through thebid, ask, and price columns, and instead, could be displayed in theprice column 206, or in relation to any other column. In one embodiment,when a trader enables the auto scalper feature, the graphical indicator304 may be automatically displayed via the trading interface 300 at themid-point of prices displayed via the trading interface, or in any otherlocation on the trading interface. Once the indicator 304 is displayedvia the trading interface 300, the trader may simply drag and drop theindicator 304 at a desired location or scroll the wheel of the trader'smouse up or down until the indicator is positioned at a desired pricelevel. Using such a method, when a trader scrolls the wheel down and up,the indicator 304 may respectively move down and up on the tradinginterface. Once the trader positions the indicator 304 at the desiredprice level, the automatic scalping application may automatically enterorders based on position of the inside market in relation to thedisplayed indicator, one method of which will be described hereinafter.

FIG. 4 is a flow chart illustrating a method 400 for automatic scalpingin an electronic trading environment according to one embodiment.

At step 402, the trading interface displays a graphical indicatorassociated with a target price, based on which orders may beautomatically entered to an exchange. As explained in reference to thepreceding figure, a trader may first activate the automatic scalpingmechanism that may then automatically trigger a display of the graphicalindicator via the trading interface. Once the indicator is displayed onthe interface, the trader may reposition the graphical indicator to thedesired target price level. Alternatively, a trader may activate anautomatic scalping graphical interface

At step 404, the automatic scalping application detects a first positionof the inside market relative to the displayed indicator. For example,the first position may be detected when a price level of the insidemarket is above the target price level associated with the indicator. Atstep 406, the automatic scalping application automatically submits afirst order to the exchange. When the inside market is above the targetprice level, the scalping application may submit a sell order. It shouldbe understood that a trader may define a number of ticks between theinside market and the target price that, when detected by the scalpingapplication, may activate submission of the first order to the exchange.Further, the trader can control a price level at which the first orderis placed on the market so that the order is placed a number of ticksaway from the target price. Further, once the inside market crosses thetarget price, the trading application may automatically place the orderat a desired price level away from the target price. Alternatively, oncethe inside market reaches a predetermined price level, the order may beplaced at the inside market.

At step 408, the automatic scalping application detects a fillassociated with the first order. Once the first order is fully orpartially filled, the scalping application may start monitoring themarket movement until, at step 410, the second position of the insidemarket relative to the displayed graphical indicator is detected.According to an example embodiment, the second position is detected whenthe inside market goes back to (moves in a downward direction), orcrosses the target price identified with the graphical indicator. Oncethe second position is detected, at step 412, the scalping applicationautomatically enters a second order to offset the short position createdwith the first order. Similarly to the first order, a trader mayconfigure a price level, such as a number of ticks away from the targetprice, at which the second order should be placed. The second order maybe a market order or an order that the trading application mayautomatically place on the market once the application detects that theinside market has moved from a position above the target price to aposition at or below the target price associated with the graphicalindicator.

The method 400 for placing automatic orders has been described inrelation to automatically placing a sell order when the inside marketmoves above the target price level, and then automatically submitting anoffset buy order, once the market moves back to the target price.However, it should be understood that the method 400 may also be usedwhen the market moves in opposite, upward direction. In such anembodiment, the trading application may first automatically place a buyorder (when the market moves below the target price level) and, when thebuy order is filled and the market moves back to the target price, thetrading application could place a sell order to offset or close positioncreated with the buy order and allow a trader to make profit.

Further, the method 400 has been described in reference to theembodiment in which two orders have been automatically placed on themarket by the trading application. However, it should be understood thatthe method described above is not limited to the fully automatedprocess. Alternatively, a trader can enter the first order manually, andonce the scalping application detects the fill associated with the firstorder and then the movement of the market to the target price, thescalping application may automatically enter a second order to themarket to offset position created with the first order. In addition, inanother embodiment the method can also provide for the automatic entryof stop/loss orders in conjunction with the second order. The stop orderwould preferably be automatically canceled if the second order getsfilled or canceled. Likewise, the second order is preferably cancelledif the stop order gets filled or cancelled. Such orders can be used tolimit losses in the event the market moves in the wrong direction. If atrader is long, the stop loss order would be a sell stop below theinside market. If the trader is short, the stop loss order would be abuy stop above the inside market. Such orders can be entered at anyprice level based on a preset parameter, such as number of ticks aboveor below the market. The stop/loss order can be also be trailing stoporder which automatically moves with the market in one direction. Forexample, a trailing sell stop order that is defined to be 3 ticks belowthe inside market will move up as the inside market moves up. Suchtrailing stop orders do not typically move if the market is movingtowards the price of the stop order. Many exchanges support stops as aparticular type of order. With respect to exchanges that do not offerthis type of order, the trading software can synthetically provide for atrigger order that accomplishes the same result.

In another embodiment, instead of displaying a single indicator, anindicator range associated with a plurality of prices at which thetradable object can be automatically traded may be displayed instead.When a trader activates the automatic scalping, a trading interface maydisplay a pair of graphical indicator bars, and the trader can move themin relation to the static axis of prices. Preferably, a trader canmanipulate and position the indicator bars at the desired price levelsby simultaneously pressing the control key and scroll wheel on theuser's mouse. It should be understood that other mechanisms to activateand control position of the indicator bars can be used instead. Forexample, a dialog box generated by the trading application can be usedto activate and control price levels associated with the indicator bars.

In an embodiment in which a mouse input is used to position parallelhorizontal lines, the indicator bars define a price range where buy andsell quantities may be automatically entered upon detecting a fillassociated with another order, such as a manually entered order, forexample. More specifically, this feature automatically enters sellquantities when a trader's manually entered buy quantity is filled.Likewise, this feature will automatically enter buy quantities when atrader's manually entered sell quantity is filled.

FIG. 5 is a block diagram illustrating an example trading interfacedisplaying an indicator range associated with a plurality of prices atwhich orders can be automatically entered on the market.

In a preferred embodiment, the indicator bars 502 and 504 span the bidcolumn 202, the ask column 204, and the price column 206; however,alternatively, the indicators may be displayed in relation to a singlecolumn and may take any user-configurable format. The indicator bars 502and 504 are set with the highest price at 110 and the lowest price at65. The inside market, as indicated by the black line 508, is a buyprice at 100, and a sell price at 105. Once the auto scalper applicationis activated, the indicators may be initially positioned in themid-point of the prices displayed on the trader's display screen. InFIG. 5, the mid-point of prices is displayed with the indicator 506 andis between the prices 85 and 90.

Once the indicators are displayed at the mid-point of prices, a tradermay scroll the wheel of the trader's mouse up causing the indicators tomove further apart, thus leaving a greater number of prices within therange of the indicator bars 502 and 504. Consequently, when the traderscrolls the wheel down, the indicator bars move closer together, near tothe mid-point, reducing the number of prices within the indicator range.

FIG. 6 illustrates different positions of the indicator bars on thetrading interface. When a trader activates the auto scalper application,two indicators, such as indicators 602, may be displayed in relation toa mid-point of prices. A trader may then scroll the wheel of thetrader's mouse up or down causing the indicators to move in relation tothe static axis of prices to indicator positions 604 and 606, thussetting a wider price range at which orders may be automatically placedon the market by the trading application. However, it should beunderstood that different methods for moving indicators in relation tothe static axis of prices can be used as well. For example, a trader maydrag and drop one of the indicators to a desired price level.Alternatively, a graphical interface may be used to specify price levelsat which the indicators should be displayed on the trading interface.

In one embodiment, as explained earlier, the trading application mayautomatically enter an order to an exchange to offset position createdwith a fill associated with a manually entered order. A trader'sposition may be defined as a difference between the total quantitybought and the quantity sold, and the trader is considered to have along position when the quantity bought is greater than the quantitysold. Similarly, the trader is considered to have a short position whenthe quantity sold is greater than the quantity bought. The more quantitythe trader owns, the longer the trader's position will be. Conversely,the more quantity the trader sells, the shorter the trader's positionwill be. It may be desirable, however, to have neither a long nor shortposition, referred to as a closed position, at the time of each day'strading session. If the buy quantity that the trader has entered in themarket is filled, thus giving the trader a long position, the system, ifactuated by the user, may automatically enter a duplicate sell quantity,which, when filled, will close the trader's position. Likewise, if thesell quantity that the trader has entered in the market is filled, thesystem may automatically enter a duplicate buy quantity, which whenfilled will close the trader's position. The automatic scalperapplication automatically and preferably, immediately enters a duplicatebuy or sell quantity, which when filled will close the trader'sposition, preventing the trader from carrying a long or short positionfor an extended period of time.

When a trader defines an indicator ranges associated with a plurality ofprices, the automatic scalper application may select a price, within theindicator range, at which to automatically enter an order based on thepreferences or rules preset by a trader. In one embodiment, a trader mayspecify that any sell/buy order entered by the automatic scalperapplication should be entered a specific number of ticks away from theinside market. For example, the order that is automatically entered maybe, in a case of a sell order, at the lowest price above the insidemarket within the range of the indicator bars, and in the case of a buyorder, at the lowest price below the inside market within the range ofthe indicator bars. Alternatively, the order may be a market order.

Further, it should be understood that an order that is automaticallyentered, may be at a price or distributed between prices calculatedpursuant to any algorithm. For example, the quantity ordered may beevenly spread among prices above (in the case of a sell order), or below(in the case of a buy order) the inside market and within the range ofindicator bars. The preferred embodiments are not limited to anyparticular technique for determining the price or prices at which theautomatic order is entered. In the preferred embodiment, the user mayset rules defining at what prices (whether at the best price or someother price) and when (whether immediately or upon detecting apredetermined market movement) the automatic scalper application sendsautomatic orders to an exchange.

Further, alternatively, the automatic scalper application may be used toset one range, using, for example, indicator bars, for buying quantityand another range for selling quantity, at the same time. In such anembodiment, the automatic scalper application, instead of waiting todetect a fill on a manually entered order, may automatically place buyand sell orders within the ranges set by a trader. For example, if theinside market is within the price range associated with the indicatorbars for buying quantity, the automatic scalper application may send abuy order to an exchange. Then, once the inside market moves to theprice range associated with the indicator bars for selling quantity, theautomatic scalper application may send a sell order to the exchange tooffset position created with the buy order. It should be understood thata trader may control the price levels at which the two orders areplaced.

Further, it should be understood that the automatic scalping methods arenot limited to a single scalping range, and multiple scalping ranges,using different pairs of indicator bars, may be activated in a singletrading window. The different ranges may be distinguished by using, forexample, different colors for the different pairs of indicator bars. Insuch an embodiment, when the market moves into one range, the automaticscalping application may enter orders at the price levels of that range.Further, scalping ranges may overlap so that, for example, the pricesassociated with indicator bars for selling quantities of one range mayoverlap with the prices associated with indicator bars for buyingquantities of another range.

It should be understood that the above description of the preferredembodiments, alternative embodiments, and specific examples, are givenby way of illustration and should not be viewed as limiting. Further,many changes and modifications within the scope of the presentembodiments may be made without departing from the spirit thereof, andthe present invention includes such changes and modifications. Forexample, it should be understood that the randomization methodsdescribed above may be used separately, or in any combination specifiedby the user.

Further, it will be apparent to those of ordinary skill in the art thatmethods involved in the system for automatic scalping in an electronictrading environment may be embodied in a computer program product thatincludes one or more computer readable media. For example, a computerreadable medium can include a readable memory device, such as a harddrive device, CD-ROM, a DVD-ROM, or a computer diskette, having computerreadable program code segments stored thereon. The computer readablemedium can also include a communications or transmission medium, suchas, a bus or a communication link, either optical, wired or wirelesshaving program code segments carried thereon as digital or analog datasignals.

The claims should not be read as limited to the described order orelements unless stated to that effect. Therefore, all embodiments thatcome within the scope and spirit of the following claims and equivalentsthereto are claimed as the invention.

1. (canceled)
 2. A trading device comprising: an electronic monitor; andata receiver configured to receive market data defining an insidemarket having at least a best bid price currently available for atradeable object and a best ask price currently available for thetradeable object; an electronic processor coupled with the electronicprocessor and the data receiver and configured to cause the electronicmonitor to display: an axis of values for the tradeable object accordingto the market data, and a target price indicator along the axis ofvalues at one of a plurality of values of the axis of values, the targetprice indicator being associated with a target price for automaticallysubmitting an order for the tradeable object, where the electronicprocessor is configured to monitor the inside market relative to thetarget price to detect the inside market crossing the target price; andan electronic order router coupled with the electronic processor andconfigured for automatically submitting a first order at a first pricefor a first quantity of the tradeable object in response to detection ofthe inside market crossing the target price in a first direction, andwhere in response to detection that at least a portion of the firstquantity has been filled at the first price and the inside marketcrosses the target price in a second direction, the electronic orderrouter is configured for automatically submitting a second order at asecond price for a second quantity of the tradeable object, the secondquantity offsetting a position created by a fill of the at least aportion of the first quantity.
 3. The trading device of claim 2 wherethe first direction includes a series of upward price increases.
 4. Thetrading device of claim 2 where the second direction includes a seriesof downward price decreases.
 5. The trading device of claim 2 where thefirst order comprises an order to sell and the second order comprises anorder to buy.
 6. The trading device of claim 5 where the order to buy isplaced at a buy price being a predetermined number of ticks away fromthe inside market.
 7. The trading device of claim 6 where the order tobuy comprises a market order.
 8. The trading device of claim 5 where theorder to sell is placed at a sell price being a predetermined number ofticks away from the inside market.
 9. The trading device of claim 8where the order to sell comprises a market order.